ACCA Financial Management (F9) Certification Practice Exam

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Prepare for the ACCA Financial Management (F9) Certification Exam with engaging quizzes and interactive content. Dive deep into financial management concepts and boost your exam confidence with questions that come with detailed explanations.

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What is the formula to calculate ROCE?

Net Income / Total Assets
Profit from Operations / Capital Employed
Total Equity / Total Liabilities
Operating Income / Current Liabilities

The correct answer is: Profit from Operations / Capital Employed

The formula for Return on Capital Employed (ROCE) is correctly represented by the calculation of profit from operations divided by capital employed. This financial metric is essential because it measures a company's efficiency and profitability relative to the capital that has been invested in the business. Profit from operations is derived from a company’s core business operations, excluding any income from non-operational activities such as investments or asset sales. Capital employed typically refers to the total resources available for use, which can be calculated as total assets minus current liabilities or as the total equity plus non-current liabilities. This ensures that the perspective of capital utilization within the business is captured effectively. This measure allows stakeholders to assess how well a company is generating profits from its capital investment, providing valuable insights for financial performance analysis and strategic decision-making. When ROCE is high, it indicates that the company is using its capital efficiently to generate earnings.